What is Capital Gains Tax?
If you dispose of things that you own and they have gone up in value during the time that you have owned them, you may have to pay tax on the profit you make. This profit is known as a capital gain.
When we say dispose of, what we mean is sell, give away, transfer to someone else, exchange for something else or, if our possession has been destroyed, receive compensation for. Assets transferred when you divorce, separate or dissolve a civil partnership can be liable for Capital Gains Tax.
Do I have to pay Capital Gains Tax on everything I own?
You don’t have to pay Capital Gains Tax on all of your assets, which is the word used to describe the things that you own. Possessions such as your car and your home (if it is your main home and you live in it) are free from Capital Gains Tax as are personal belongings worth £6,000 or less when you sell or give them away. Any tax-free savings and investments you have such as ISAs and PEPs are not liable for Capital Gains Tax and neither are UK Government gilts and winnings from betting, the lottery or the pools.
Assets that are liable for Capital Gains Tax include: property; shares, unit trusts and other investments; and antiques, jewellery and personal possessions worth more than £6,000.
Capital Gains Tax is complicated so it is a good idea to speak to a tax advisor or your local tax office if you think you might need to pay.
For information on how to find your local tax office, see the HMRC website.
How much do I have to pay?
Everybody has an annual tax-free allowance for Capital Gains Tax, which is called the Annual Exempt Amount. In the tax year 2009-10 (which runs from 6 April to 5 April), the allowance is £10,100. Above this, Capital Gains Tax is charged at a flat rate of 18%.
How do I pay Capital Gains Tax?
You need to report your capital gain to HMRC. How you do this depends on whether you are sent a Self Assessment tax return from HMRC or not. See our page on Income Tax.
If you are sent a Self Assessment tax return, you’ll need some extra Capital Gains Tax pages. See HMRC website for more details.
If you don’t have to file a Self Assessment tax return, you need to contact your local tax office. You need to do this by 5 October after the end of the tax year or you may receive a penalty.